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The arguement for the holiday the last time was "job creation" which didnt really bear fruit. Dont think it will happen again unless it is part of a larger tax

The arguement for the holiday the last time was "job creation" which didnt really bear fruit. Dont think it will happen again unless it is part of a larger tax reform bill.

michaelt 12y ago
A cynic would say that if politicians want the tax holiday to appease their campaign donors, it doesn't have to /actually/ create jobs, voters just have to /believe/ it creates jobs.
- kevinpet 12y ago
  Insufficiently cynical. Voters just have to believe that politicians believed it would create jobs.
rdl 12y ago
Given how low the interest rates are on Apple's debt, I don't think repatriating cash would lead to any job creation in the US, anyway, even at 0%.
- nostromo 12y ago
  It might help US M&A however. For example, check out this story about how Skype was a lucrative acquisition for Microsoft in part due to US tax rates. http://www.marketwatch.com/story/microsoft-skype-deal-shows-need-for-tax-reform-2011-05-10 http://www.marketwatch.com/story/microsoft-skype-deal-shows-... tl;dr: Microsoft had beaucoup bucks stashed in the EU that they didn't want to bring back to the US due to our corporate taxes, so they put it to use by buying Skype. Also, keep in mind that not every corporation is in such an enviable position as is Apple.
  - OnyeaboAduba 12y ago
    It might but I dont see how M&A helps the general public.You could make a argument that they have a negative effect actually.
    - atlbeer 12y ago
      It creates instant millionaires that want to buy houses, cars and start new companies. It basically converts an illiquid business asset for a person(s) and concerts it to a liquid asset.
adventured 12y ago
The best argument for the holiday, is the fact that we're one of the only major nations doing something so foolish as double taxing foreign profits. The idea of eg paying China's corporate income tax, and then paying America's on the way home, is absurd to say the least. A lot of companies will be stuck with 45% to 60% income tax bills on foreign profit. I can think of few things to make America less competitive overseas.
- sbov 12y ago
  My spider sense is tingling - from an ignorant observer on the subject of corporate taxes, this seems wrong. As someone who isn't 100% ignorant about taxes in general, I've noticed that there's a shitload of completely wrong information about taxes out there. It's amazing how many smart people are incredibly ignorant, and then spread that ignorance, about how taxes actually work. So I have to ask: Is this how it really works? At least for personal investments, IIRC you get some sort of foreign tax credit. From my initial searching, it seems like there's something similar for corporations.
  - gamblor956 12y ago
    The corporate foreign tax credit is even more generous than the FTC available to individuals. They get credit for taxes paid on the dividends (i.e., withholding taxes) and in some cases for the foreign taxes the dividend-paying company paid on its income.
  - mikeyouse 12y ago
    The whole idea of 'double-taxation' is a canard. That's another topic though. > Is this how it really works? At least for personal investments, IIRC you get some sort of foreign tax credit. Any money Apple pays to foreign governments as income tax on profits is included in the calculation of their domestic tax liability. So if Apple had $1B in overseas profits, paid 5% in Ireland as income tax, then wanted to repatriate the remainder to the US, the government would seek $300M in tax -- not the $350M that would be indicated by our 35% corporate income tax rate. People trotting out the 'double-taxation' nonsense are promoting the idea that Apple should be able to venue-shop for an ultra-low-tax locale to claim their profits, then be free-and-clear of their US obligations. Two more things worth mentioning: 1. The 'overseas' money typically isn't physically overseas. The money is in US banks, circulating as loans in the US economy, but is only overseas on an accounting ledger for tax purposes. This greatly blunts the potential impact of tax holidays. 2. If Apple takes out debt to fund operations purely to avoid repatriating money, the US taxpayer would then be subsidizing Apple even further. Interest on debt is a deductible expense, so that 2.5% per year Apple is paying, would be deducted from their income in the next tax year.
SilasX 12y ago
The politically viable argument is that it will create jobs, and is indeed false. The serious, economic argument is that companies shouldn't have to keep profits abroad simply because of a screwy, distortive tax system at the international level. And it is a valid concern. (Before anyone says it, yes, I'm aware that some taxes, by design, distort behavior in a socially desirable direction. Differential corporate taxes at the international level ain't one of them.)
- chockablock 12y ago
  A race to the bottom (tax rate) hardly seems like the only/best way to address this.
  - aarkling 12y ago
    The US and Lesotho are the only countries in the world that taxes foreign income.
  - MikeCapone 12y ago
    It's not so much about the level of taxes as it is about taxing foreign income, which is not something that other countries do, giving a competitive disadvantage to the US. Even if Apple brings back the cash and dividends it out, that's more money in the pockets of shareholders, which are pretty much everybody with an index fund, pension funds, mutual funds, etc. That can't hurt the US compared to leaving the cash abroad.
    - mikeyouse 12y ago
      Many other countries tax overseas profits, and many of the ones who don't, have very strict rules about foreign ownership to assure they aren't being gamed. The G20 is fairly united on this front.

The arguement for the holiday the last time was "job creation" which didnt really bear fruit. Dont think it will happen again unless it is part of a larger tax reform bill.

michaelt 12y ago

A cynic would say that if politicians want the tax holiday to appease their campaign donors, it doesn't have to /actually/ create jobs, voters just have to /believe/ it creates jobs.

kevinpet 12y ago
Insufficiently cynical. Voters just have to believe that politicians believed it would create jobs.

rdl 12y ago

Given how low the interest rates are on Apple's debt, I don't think repatriating cash would lead to any job creation in the US, anyway, even at 0%.

nostromo 12y ago
It might help US M&A however. For example, check out this story about how Skype was a lucrative acquisition for Microsoft in part due to US tax rates. http://www.marketwatch.com/story/microsoft-skype-deal-shows-need-for-tax-reform-2011-05-10 http://www.marketwatch.com/story/microsoft-skype-deal-shows-... tl;dr: Microsoft had beaucoup bucks stashed in the EU that they didn't want to bring back to the US due to our corporate taxes, so they put it to use by buying Skype. Also, keep in mind that not every corporation is in such an enviable position as is Apple.
- OnyeaboAduba 12y ago
  It might but I dont see how M&A helps the general public.You could make a argument that they have a negative effect actually.
  - atlbeer 12y ago
    It creates instant millionaires that want to buy houses, cars and start new companies. It basically converts an illiquid business asset for a person(s) and concerts it to a liquid asset.

adventured 12y ago

The best argument for the holiday, is the fact that we're one of the only major nations doing something so foolish as double taxing foreign profits. The idea of eg paying China's corporate income tax, and then paying America's on the way home, is absurd to say the least. A lot of companies will be stuck with 45% to 60% income tax bills on foreign profit. I can think of few things to make America less competitive overseas.

sbov 12y ago
My spider sense is tingling - from an ignorant observer on the subject of corporate taxes, this seems wrong. As someone who isn't 100% ignorant about taxes in general, I've noticed that there's a shitload of completely wrong information about taxes out there. It's amazing how many smart people are incredibly ignorant, and then spread that ignorance, about how taxes actually work. So I have to ask: Is this how it really works? At least for personal investments, IIRC you get some sort of foreign tax credit. From my initial searching, it seems like there's something similar for corporations.
- gamblor956 12y ago
  The corporate foreign tax credit is even more generous than the FTC available to individuals. They get credit for taxes paid on the dividends (i.e., withholding taxes) and in some cases for the foreign taxes the dividend-paying company paid on its income.
- mikeyouse 12y ago
  The whole idea of 'double-taxation' is a canard. That's another topic though. > Is this how it really works? At least for personal investments, IIRC you get some sort of foreign tax credit. Any money Apple pays to foreign governments as income tax on profits is included in the calculation of their domestic tax liability. So if Apple had $1B in overseas profits, paid 5% in Ireland as income tax, then wanted to repatriate the remainder to the US, the government would seek $300M in tax -- not the $350M that would be indicated by our 35% corporate income tax rate. People trotting out the 'double-taxation' nonsense are promoting the idea that Apple should be able to venue-shop for an ultra-low-tax locale to claim their profits, then be free-and-clear of their US obligations. Two more things worth mentioning: 1. The 'overseas' money typically isn't physically overseas. The money is in US banks, circulating as loans in the US economy, but is only overseas on an accounting ledger for tax purposes. This greatly blunts the potential impact of tax holidays. 2. If Apple takes out debt to fund operations purely to avoid repatriating money, the US taxpayer would then be subsidizing Apple even further. Interest on debt is a deductible expense, so that 2.5% per year Apple is paying, would be deducted from their income in the next tax year.

SilasX 12y ago

The politically viable argument is that it will create jobs, and is indeed false. The serious, economic argument is that companies shouldn't have to keep profits abroad simply because of a screwy, distortive tax system at the international level. And it is a valid concern. (Before anyone says it, yes, I'm aware that some taxes, by design, distort behavior in a socially desirable direction. Differential corporate taxes at the international level ain't one of them.)

chockablock 12y ago
A race to the bottom (tax rate) hardly seems like the only/best way to address this.
- aarkling 12y ago
  The US and Lesotho are the only countries in the world that taxes foreign income.
- MikeCapone 12y ago
  It's not so much about the level of taxes as it is about taxing foreign income, which is not something that other countries do, giving a competitive disadvantage to the US. Even if Apple brings back the cash and dividends it out, that's more money in the pockets of shareholders, which are pretty much everybody with an index fund, pension funds, mutual funds, etc. That can't hurt the US compared to leaving the cash abroad.
  - mikeyouse 12y ago
    Many other countries tax overseas profits, and many of the ones who don't, have very strict rules about foreign ownership to assure they aren't being gamed. The G20 is fairly united on this front.